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8/8/2019 Channels - Whole Selling
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Channel Institutions -Wholesaling
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Learning Objectives Understand functions of a wholesaler
Understand various classes of
wholesalers
Major wholesaling decisions
Benefits and limitations of wholesalers
Understand about a ± distributor inmore detail
Trends in wholesaling practices
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Need for Wholesalers
Widespread economy ± consumers can onlyreached by thousands of retailers (except for
consumer durables and industrial products) Reaching these retailers by a company
directly is not possible (except for consumer durables and industrial products)
Hence the need for wholesalers in two forms: ± Well established free-lance wholesalers
± Contracted distributors, stockists and agents
Characteristics«.
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Characteristics of Wholesalers Operate on large volumes but with chosen
group of products
± Food, grocery, pharma or automobile spares etc The company itself, contracted parties or free
lancers, can operate as wholesalers
Mostly B2B business ± trade and institutions
Wholesaler could also be a retailer ± in ruralmarkets ± W/s sells to other retailers and alsoto consumers
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Characteristics of Wholesalers Sell physical inputs or products ± tangible
goods ( Ws in some service industries)
Optimise results, maximise service(effectiveness) and minimise operating costs
(efficiency)
Buy goods for resale, keep inventory, take
risks of price changes, negotiate terms,
procure orders, deliver and extend credit.
D efinition«
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Definition
Wholesaling is concerned with the
activities of those persons or
establishments that sell to retailers andother merchants and / or industrial,
institutional and commercial users but
do not sell in large amounts to
consumers ± US Bureau of Census
D elivering value«
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Delivering Value
Keep goods accessible to customers
instantly
At times, get together to bargain for
better terms
Pass on benefits or incentives to their
customers
Have a wide trading area
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Difference with Retailers
Not too worried about location, ambience or promotions ± prefer to be in the main market
Deal with other businessmen and notconsumers
Deal with a specific group of products only
Much larger trading area
Much larger transactions with suppliers andcustomers
Believe in low margins but high volumes.
F unctions«
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Functions of Wholesalers Varies in degree between free-lance,
company distributors and stockists / agents
Sales and promotion of chosen companyproducts
Buying the assortment of goods
Breaking bulk to suit customer requirements Storage and protection of goods till sold
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Functions of Wholesalers Grading and packing of commodities
Transportation of goods to customers
Financing the buying of customers
Bearing the risks associated with thebusiness
Collecting and disseminating marketinformation to both suppliers andcustomers
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Types of Wholesalers Full service: stocking, selling, offering credit,
delivery and business assistance (company
distributors, wholesale merchants) Limited service: range of service is limited
(examples include Metro C&C, mail order)
Merchant w/s: independent businesses
Brokers and agents: bring buyer and seller together ± do not take possession of goods
Others: agri business, auction companies etc
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Limitations of Wholesalers
Some of them do not give completeinformation to suppliers for selfish reasons
Cannot be relied on to do equitable
distribution At times, do not want company and
customers to meet
Tend to hoard goods and influence pricing
Consumers have no say in pricing or qualityin a w/s dominated system
M ajor decisions«
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Major WholesalingD
ecisions Which markets to operate in
Manpower to employ
What products to sell
Pricing decisions / Promotional support
Credit and collections
Image and customer perception Warehouse location and design
Inventory Control
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Favourable Factors
Companies have limitations in market / outletcoverage. Wholesalers are required to fill thegaps
Hundreds of small companies who cannotafford to set up distribution networks ± needto depend on wholesalers
In food grains, fruits and vegetables ± hardly
any organised distribution network.Wholesalers help move goods from farm gateto consumers
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Favourable Factors
Big companies also need wholesalers toget big volumes
W/s extend credit to customers.
Companies cannot match this Retailers have to visit w/s markets to
buy food grains, cereals and pulses ±
buy a lot more.
U nfavourable«
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Unfavourable Factors Companies coverage focus on retailers
and institutions through their distributors
Using modern retail formats aswholesalers
More outlets like Metro C&C being
encouraged Enforcing strict price control so that w/s
do not sell below company prices.
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Distributor
Is a wholesaler nominated by a company to
exclusively re-distribute the company
products to its customers in a designatedterritory. He does not deal in competitor¶s
products. Does not sell from his premises.
Extends credit selectively.
± A redistribution stockist for HLL
± A distributor for Philips lighting division
± A distributor for L&T engineering division
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Dealer
Role similar to a distributor but ± May not have a clearly defined territory and may
sell both in the market and from his shop ± May deal with competitive products also
± Extends credit selectively.
± Dealers in industrial products may have better defined roles.
Examples: ± Dealer for an edible oil company
± A dealer for garment brands
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Stockist May be working for a company with a
designated territory but does not re-
distribute the stocks. Sells from hispremises. Extends credit selectively.
± A stockist for paper products
± A stockist for automobile spares
Re-distribution is visiting customer premises to sell products
M anaging distributors«.
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Managing Distributors
The principles are similar across
industry verticals. FMCG is the most
complex.
Has the capacity to maximise sales andmarket shares.
Has to ensure buying goods from the
company and re-distribution to the trade
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Managing Distributors
Distributor responsibilities include: ± Buying adequate quantities by Stock Keeping Unit
(SKU) for redistribution
± Ensuring full market coverage of all customers in
the territory assigned to him ± Help finance the operations ± pays for the goods
upfront but extends credit to his customers
± Maintaining inventory of company productsadequate at all times to service the market
± Assist company in its promotional efforts
W hy necessary?«.
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Need for
Distributors Under three circumstances:
± For entering a new town
± For additional coverage in the same town
± For replacing an existing distributor For entering a new town, assess the potential
for business to decide: ± If the town can sustain a full fledged distributor
± The number of distributors required Starts with a town profile of potential, number
of customers to be serviced and thecompetition.
Cost of servicing«
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Cost of Servicing Cost benefit of using distributors to be
assessed ± Logistics cost of serving the market
± The number of customers to be covered bycategory ± wholesalers, retailers, institutions
± Frequency of visits to markets and outlets
± Sales revenue estimate from each visit
± Markets to be covered with ready stocks or order
booking for later delivery ± Likely collections during each visit ± gives an idea
of the credit requirements
Exp ectations«
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Expectations from a
Distributor To be stated at the start of the relationship
Helps get the right kind of distributor also
± Achieving sales targets ± volume, value and packs ± Financial commitment on inventory and credit
± Investment in infrastructure ± space, vehicles
± Manpower ± front line and back office
± Distribution effort ± market and outlet coverage asper a beat plan with productive calls
± Developing new markets and new accounts
± Managing key accounts and institutional business
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Expectations from a
Distributor Merchandising and displays in the market
Secondary sales efforts and tracking ± critical
for fmcg and pharma (secondary sales issales from the distributor to the outlets in the
market)
Effectively handling promotions and schemes
initiated by the company
Managing damaged stocks
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Expectations from a
Distributor Organising and participation in promotional
events
Assist company in making a success of launching new products and packs
Handling consumer quality complaints
Handling statutory requirements on behalf of
the company Payments and remittances promptly to the
company
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Key Learnings Wholesalers are required to reach hundreds
of customers and retailers
Wholesaler business is usually B2B Wholesalers can be free-lance or appointed
by companies ± like distributors
Company distributors are bound by strict
operating norms Future of wholesalers in India still seems
favourable